Young India Prefers Home Ownership Over Home Renting
Rakesh Reddy, Director, Aparna Constructions and Estates shares his views on how millennials are redefining the residential market in India.
The COVID-19 pandemic has made young people realise the importance of property ownership compared to renting. There is an increasing desire for owning tangible assets with strong potential for price appreciation such as real estate. The ensuing work-from-home opportunities have changed the mind-set of those who previously did not want to commit to making a large investment.
This year has seen a large number of young people in India purchase real estate for the first time. This home buying trend indicates that young people want stability and minimisation of risk during times of uncertainty. It is clear that 2021 will be the year where we witness the rising importance of homeownership.
Throughout 2021, developers have been recording a substantial increase in the sale of ready-to-occupy homes as compared to the previous year. Millennial are driving this trend which is being seen across all segments, especially mid-budget to luxury properties. The inclination towards ready-to-occupy homes is because young homebuyers would not want to invest in an on-going project that may not be completed in the estimated time. Since the construction sector was given priority to continue operations during the lockdown, there are more options available today in terms of ready-to-occupy properties. This significantly reduces consumer hesitation and market risk.
The increasing opportunities for remote work have led more young people to consider purchasing homes beyond the metros and instead focus on tier 2 and tier 3 cities. In circumstances where people can work from any location, many are preferring to buy property and relocate to areas beyond major metros where property prices offer more value. Young homebuyers are opting to move away from the hustle and bustle of populated cities in favour of more relaxed lifestyles. This trend of reverse migration and decentralisation will improve economic activity in tier 2 and tier 3 cities which will lead to increased growth.
Over the past year, the RBI’s decision to keep interest rates at historic lows have subsequently reduced home loan rates. This has further incentivised many young homebuyers to take advantage of the market opportunity. Coupled with discounts in stamp duty in some states, these trends have encouraged buyers who were previously deliberating to move forward with their home purchase. Reducing stamp duty provides stimulus to the market and incentivises potential homebuyers. A reduction of stamp duty would also promote affordable housing as this would bring down the transaction cost significantly, thus attracting a wider pool of first-time homebuyers.
Advantageous tax policies have also made real estate investment more lucrative. Investing in real estate at an earlier age can provide more opportunities to enjoy a range of tax benefits. One can avail tax benefits on home loans, which allows young people to own a real estate asset with tax exemptions which lowers the impact on their savings.
Trust in the developer significantly influences the purchasing decisions of young homebuyers. The pandemic has adversely affected the businesses of several small and mid-size developers. However, established and reputed developers have been able to expand their footprint and continue providing high-quality residential properties. This has effectively weeded out unscrupulous players from the market and allowed only credible builders to flourish. Young homebuyers are opting for high-value properties by developers with proven track records. There is a strong preference for RERA-approved, branded projects by prominent developers rather than unorganised, smaller players due to low levels of confidence amongst consumers.
Combining value-for-money and convenience, gated communities have become a popular option for young homebuyers. Living in a gated community has many advantages including a wide range of amenities, 24-hour security, and community support – all while being surrounded by lush and green environs. Reputable developers are investing in modern facilities including club houses, fitness centres, swimming pools, spas, playgrounds and sports facilities.
With young consumers now seeking the financial security of owning a home, this new trend is going to considerably shape the recovery and growth of the real estate sector moving forward.